Interest rates – Page 2 – The Burning Platform

INFLATION ABOUT TO EXPLODE HIGHER

“Those who are capable of tyranny are capable of perjury to sustain it.” ― Lysander Spooner

We all know the BLS artificially suppresses the CPI through bullshit substitution adjustments, quality adjustments, and various other incomprehensible hedonic adjustments made by government apparatchiks at the behest of their politician bosses. Some obscure theoretical academic calculation called owners equivalent rent accounts for almost a quarter of the CPI weighting.

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It has no relation to reality as it has increased by only 12% since 2012, while the Case Shiller Housing Price Index is up 52% over the same time frame. The median price of existing home sales is up 30% over the same time frame. It also has no relation to rent increases, as they have gone up 22% nationally since 2012. It’s essentially a made up number by goal seeking bureaucrats doing the bidding of their establishment masters.

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Fed Cornered: Core CPI Jumps Near 4 Year Highs As Rent Rises At Fastest Rate In 9 Years

If the government is admitting inflation is running at a 4.8% rate over the last three months, then you can double that to get the real rate. With wages growing at 2.5%, do you understand why most of the country is pissed off as they become more impoverished every day?

When you see unemployment supposedly below 5%, unemployment claims at three decade lows, inflation running at 4.8%, corporate profits near record levels, Wall Street reporting billions in profits, and politicians expounding upon our resilient economy, why is Janet Yellen keeping rates at .25%?

If these economic figures were true, the Fed should have short term rates at 2% or higher.

Could it be the emergency level interest rates have nothing to do with the economy and everything to do with enriching her banker benefactors and the corporate establishment?

by Tyler Durden

Jul 15, 2016 8:59 AM

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Just as we warned, the gas price ‘base effect’ is pressuring consumer price indices higher (Energy +1.3% MoM – up for 3rd month in a row) but even Core CPI rose more than expected (+2.3% vs 2.2% exp) back near its highest since April 2012. Shelter costs rose 0.3% MoM (but 3.5% YoY – the highest since July 2007), along with increases in education, medical care, and airline fares also sent consumer prices broadly higher. Between surging PPI and this, The Fed is increasingly cornered (and as we nopted last night, running out of excuses).

“We’re starting to see upward pressure on the inflation numbers,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd., said before the report. “It reinforces the case for the Fed to resume tightening, though they’re highly risk averse right now.”

Core Cpi back near cycle highs…

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What Does Today’s “Rate Hike” Mean?

Guest Post by Paul Craig Roberts

The Federal Reserve raised the interbank borrowing rate today by one quarter of one percent or 25 basis points. Readers are asking, “what does that mean?”

It means that the Fed has had time to figure out that the effect of the small “rate hike” would essentially be zero. In other words, the small increase in the target rate from a range of 0 to 0.25% to 0.25 to 0.50% is insufficient to set off problems in the interest-rate derivatives market or to send stock and bond prices into decline.

Prior to today’s Fed announcement, the interbank borrowing rate was averaging 0.13% over the period since the beginning of Quantitative Easing. In other words, there has not been enough demand from banks for the available liquidity to push the rate up to the 0.25% limit. Similarly, after today’s announced “rate hike,” the rate might settle at 0.25%, the max of the previous rate and the bottom range of the new rate.

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The Epocalypse: What Will D-Day Look Like?

Guest Post by David Haggith at The Great Recession Blog

D-day, December 16, 2015. It’s now the dawn of that day when either the Fed Does or the Fed Doesn’t. It doesn’t matter. Either way, the economic apocalypse begins. Let me share something counter-intuitive. Whether the Fed raises interest rates or not, this Wednesday is D-day for the Fed’s economic recovery because the Fed is Damned if it does and Damned if it doesn’t. I’ll certainly show you why, but the counterintuitive part is that you can expect the market to crash upward as it leaves Wonderland and returns to reality.

What if the Fed doesn’t?

While I am certain, like many, that the Fed will raise rates, the US stock market may crash faster if the Fed does not. That’s one thing that is counter-intuitive to some. I believe it would drop the very next day out of shear bewilderment as people try to fathom what the Fed’s failure to raise rates means. Throughout 2015, the Fed has been building up expectations for its first raise in interest rates in nine years. In a world where every word of the Fed is dusted off with a soft-hair brush like an artifact in the sand, the Fed’s broad hints of an interest-rate rise are about as abrupt as the Fed gets.

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This Is How America Has Changed Since The Last Fed Rate Hike

The Fed is caught in a trap and they can’t get out.

Submitted by Tyler Durden on 12/11/2015 15:12 -0500

On June 29, 2006, the Fed did something it would not do again for (at least) nine and a half years: it hiked rates by 25 basis points, its 17th consecutive rate hike. Everyone knows what happened after.

On December 16, 2015, the Fed is expected to do something it hasn’t done for 3,457 days: hike rates by 25 bps, ending the longest period in US history (84 months) of zero interest rates.

How has the world changed in the interim? Some quick observations from BofA:

Back then US housing starts were booming (2¼ million per annum), a stock market bubble was taking place in Saudi Arabia, another one was forming in China, no one had heard of “Quantitative Easing” and there was no such thing as the iPhone.
Today, US housing starts are moribund (around 1 million per annum), the Saudi’s have just been downgraded (a devaluation of the Saudi riyal is one of BofAML’s noted “black swan” events in 2016), Chinese debt deflation has reduced China’s “growth” opportunity set to babies, tourists & capital outflows, central banks have purchased a remarkable $12,400,000,000,000 of financial assets since Bear Stearns, and the iPhone now powers retail sales.

And here is the biggest difference: back then total debt/GDP was 61%, with total debt just over $8 trillion. Now, it is 104%, with the total US debt just shy of $19 trillion.

Good luck Fed.

THE FED INDUCED FARCE

The minutes from the last Fed meeting were released on Wednesday afternoon. The minutes, along with a squadron of jabbering Fed heads lying about the economy doing great, pretty much locked in the most talked about .25% interest rate increase in world history. Evidently the Wall Street titans of greed have convinced the muppets higher interest rates are great for stocks, as the market soared by 250 points. As institutional money exits the market on these rigged up days, the dumb money retail investor buys into the market with dreams of riches just like they did with Pets.com in 2000, McMansions in 2005, and Bear Stearns in 2007.

The Fed has lost any credibility they ever thought they deserved by delaying this meaningless insignificant interest rate increase for the last three years, so they will make this token increase in December come hell or high water. They want to give themselves some leeway for easing again when this debt saturated global economy implodes in the near future. The Fed is trapped by their own cowardice and capture by the Wall Street cabal. If they raise rates the USD will strengthen even more than it has already. The USD is already at 11 year highs. It has appreciated by 25% in the last year versus the basket of world currencies. The babbling boobs on the entertainment news channels authoritatively expound with a straight face about the rise in the dollar being due to our strong economic performance. It’s beyond laughable, as the economy has been sucking wind since the day the Fed turned off the QE spigot in October 2014.

Chart of the Day

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THE TRUTH ABOUT THE NATIONAL DEBT & JANET YELLEN

What Janet knows is that a 1% increase in interest rates would increase the interest on the National Debt from $400 billion per year to $600 billion per year, a 50% increase. Interest rates back at NORMAL historical rates that we had as recently as 2007 would increase the interest on the National Debt to $1 trillion per year, a 150% increase. Plus, the National Debt increases by $1.5 billion per day, so our interest bill goes up by $35 million per day already. Do you really think Yellen is going to be increasing interest rates?

Via Ben Garrison

IS GOOD NEWS BAD NEWS?

Both surveys from the Bureau of Lies and Scams showed a huge increase in jobs during October. That’s funny, because Challenger, Grey and Christmas keeps showing lay-off announcements up 40% over last year. Of course, the good old Birth/Death adjustment added 165,000 phantom jobs into the calculation, so I’m sure its accurate. Everyone knows there are new businesses opening every day, hiring hundreds of thousands of high functioning millennials. Supposedly the single biggest driver of new jobs was among those with a high school education or less. I’m sure those are high paying jobs.

The Federal Reserve had already decided they needed to raise rates by .25% before year end to bolster their non-existent credibility. What better than an employment report that was 50% higher than the highest Wall Street bank estimate. What a coincidence. I wonder how the soaring USD will impact the profits of our international conglomerates? Oops.

So the market sold off in August and September because the economy was clearly weakening. Then the market rallied in October because a weak economy meant the Fed would never raise rates again. Now this employment report supposedly clinches a Fed rate hike in December. Now for all the housing bulls, the 10 Year Treasury yield has spiked from 1.9% at the beginning of October to 2.3% as of this morning. And that’s before the Fed even raises rates. Can this weakening economy, with global trade going into the toilet, withstand interest rates going up by even 1%? Not a chance.

Let the spin begin. The CNBC bimbos and boobs have been using the storyline of bad economic news is good for the stock market. Now they have to pivot 180 degrees and propagandize that good economic news is actually good for the stock market. This entire bubble economy has been solely dependent upon 0% interest rates for the last six years. We’ll see how it does now.

October Jobs Soar To 271K, Smash Expectations, Unemployment Rate 5.0%, Hourly Earnings Spike

Submitted by Tyler Durden on 11/06/2015 08:33 -0500

If there was any doubt if the Fed would hike rates in December, it is gone now: October payrolls soared by 271K, smashing not only consensus of 184K, but the highest expected print. This was the highest monthly print since December 2014 when the gain was 329K and pushed the YTD average monthly gain from 199K to 206K.

The unemployment rate dropped from 5.1% to 5.0%, the lowest since April 2008, and most importantly, the average hourly earnings rose from 0.2% to 0.4%, the highest hourly earnings jump since 2009!

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Things Fall Apart

Guest Post by Monty Pelerin

“Things fall apart”is an apt sub-title for historians to apply to the first half of the 21st century. The phrase properly describes the collapse of the domestic and foreign policy of the United States. Further, it also is appropriate to describe the happenings in Europe, the Middle East and Asia.

freedom15 Things fall apart describes the economy of every developed nation and the balance of power that the world has known since the end of World War II.

The powers that be have lost control. After almost a century of playing the Wizard of Oz, the curtain is disintegrating. Institutions to ensure control, stability and prosperity are failing. People and markets were not to be trusted and most of these institutions were established to protect against such freedom. Bureaucrats, central planners and big governments were to be the answers for a better world.

The damage of nearly a century of this nonsense is suddenly becoming evident. Things fall apart is characterized by institutions that no longer are trusted or believed in. Few institutions are seen to work and when they do they are increasingly seen as favoring the elites at the expense of the masses. No institution is under greater scrutiny as the cloak of wisdom is being destroyed by the hard facts of reality is that of central banking, the corner piece of socialism even at the height of the Thatcher–Reagan movement back toward markets. The Daily Bell writes about the US Federal Reserve, although other central banks are incurring similar doubts and distrust:

Things Fall Apart Around Janet Yellen

By Daily Bell Staff – October 16, 2015

Fed policymakers downplay divisions on U.S. rate hike … Federal Reserve policymakers are not as divided as it may appear and are generally operating under the same framework for determining when to raise interest rates, one Fed official said on Thursday, while another said the differences of opinion reflect the countervailing economic data. Many Fed watchers are exasperated by the mixed messages from the U.S. central bank in recent weeks. Fed Chair Janet Yellen and other officials have said they expect a rate hike will be needed by the end of this year, but two Fed governors this week urged caution. – Reuters

Dominant Social Theme: Everything is OK. Janet Yellen is OK. The Fed is OK. Inflation is OK. The data is OK. It’s OK, man!

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Yellen Is Trapped in the Worst Nightmare Ever

Guest Post by Martin Armstrong

Yellen has inherited a complete nightmare. Thursday’s decision to delay yet again the long-awaited liftoff from zero interest rates is illustrating that the world economy is totally screwed. There is a lot of speculation about why the Fed seems so reluctant to “normalize monetary policy”. There are of course the typical domestic issues that there is low inflation, weak wage gains in the face of strong job growth, a hike will increase the Federal deficit and then there is the argument that corporations that now have $12.5 trillion in debt. All that is nice, but with corporate debt, our clients are locking in long-term at these levels, not funding anything short-term. Those clients who have listened are preparing for what is to come unlike government which has been forced to shorten the average duration of their debts blind to what happens when rates rise, which will be set in motion by the markets – not Yellen.

Fed is really caught between a rock and a very dark place. Yes, they have the IMF and the world pleading with them not to raise rates for it will hurt other debtors who borrowed excessively using dollars to save money. The Fed is also caught between domestic policy objectives that dictate they MUST raise rates or they will bankrupt countless pension funds and international where emerging markets will go into default because commodities have collapsed and they have no way of paying off this debt that has risen to about 50% of the US national debt.

By avoiding the normalization of interest rates (hikes), the Fed has encouraged government to spend far more than they realize because money is cheap. This will eventually light the fire under the economy helping to fuel the Sovereign Debt Crisis. There appears to be no hope for the Fed and they will be forced to raise rates only when they see asset inflation in equities. Then they will have no choice. This is the worst possible mess and the longer they have waited to normalize interest rates, the worst the total crisis is becoming for they will have zero control over the economy and once that is seen, holy Hell will break lose.

Tell us Ron, What’s the Plan, What’s the “Austrian” Plan?

Guest Post by Pater Tenebrarum

What? No Austrian Prescription? Bloomberg Reporters Cannot Believe It

This is truly funny. Ahead of the FOMC decision, Ron Paul, who is well-known as an an implacable critic and enemy of the Fed and a fan of the Austrian School of Economics, was interviewed at Bloomberg as to “what the Fed should do”.

What makes it so funny is that the Bloomberg reporters seemingly cannot believe that Austrian economists simply have no “prescriptions” for the Fed. They keep pushing Ron Paul for giving them some advice. “But we do have a Fed…given that the institutional set-up is what it is and we cannot change it, what should they do? What’s the “Austrian” prescription?”

Dear Dr. Paul, please tell the Fed what to do! 🙂

Photo credit: Sean Gardner / Reuters

We happen to think Ron Paul could actually have handled the reply to this a bit better than he did. He could e.g. simply have told them that their question was akin to asking him “how many tractors should GOSPLAN produce this year?” It is simply an utterly nonsensical question. What inter alia makes Austrian economics unique is precisely that the theory leads to the inescapable conclusion that one cannot improve on the free market economy by means of statist intervention and central planning.

There Cannot Be a “Right” Fed Decision

Hence there cannot be any “advice” to a central bank, except the one Ron Paul actually gives: butt out and let the market decide. Of course this is tantamount to telling the Fed that it is surplus to requirements – which it indeed is. Ron Paul also mentions that the government should actually open money to competition – in other words, it should repeal legal tender laws and allow private money production to occur.

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Inside Janet Yellen’s Brain at 4 a.m …

Guest Post by Bill Bonner

No Return to Sanity

GUALFIN, Argentina – Poor Janet Yellen. Usually, we reserve our pity for the poor, the downtrodden, and the hopeless. But today, we spare a thought for the clueless… and feel Yellen’s pain. Markets are tense. Investors seem to be holding their breath. Everyone is waiting to see what the Fed will do.

There must be hundreds of thousands – if not millions – of well-educated adults sitting on the edges of their seats… eager to hear what this rather ordinary functionary will say.

Try to spot the patsy/ fall guy…

Photo credit: Mark Wilson / Getty Images

Will Janet Yellen proudly put the Fed on the side of the angels, announcing that she and her crew have decided to move the Fed’s key interest rate to a more normal level… regardless of how much it costs the cronies?

Will she admit that the Fed’s ZIRP and its three QE programs have been failures? Or that they have shifted trillions of dollars toward the rich while leaving Main Street poorer? Will she beg forgiveness for such errant policy decisions over such a long time and vow publicly never to interfere with the market again? No, she won’t.

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TAKE THE OPPORTUNITY TO BAIL BEFORE IT’S TOO LATE

Last week ended with the cackling hens on CNBC and the spokesmodels on Bloomberg bloviating about the temporary pothole on the road to riches. They assured their few thousand remaining viewers the 11% plunge in the stock market was caused by China and the communist government’s direct intervention in their stock market, arrest of a brokerage CEO, and threat to prosecute sellers surely cured what ails their market. The Fed and their Plunge Protection Team co-conspirators reversed the free fall, manipulating derivatives and creating a short seller covering rally back to previous week levels. The moneyed interests are desperate to retain the appearance of normality and stability, as their debt saturated system teeters on the verge of collapse.

John Hussman’s weekly letter provides sound advice for anyone looking to avoid a 50% loss in the next 18 months. The market has been overvalued for the last three years and now sits at overvaluation levels on par with 1929 and 2000. The difference is that fear has been overtaking greed in the psyches of traders. The average Joe isn’t in the market. Only the Ivy League MBA High frequency trading computer gurus are playing in this rigged market. The 1,100 point crash last Monday is what happens when arrogant young traders, fear and computer algorithms combine in a perfect storm of mindless selling. Suddenly the pompous risk takers became frightened risk averse lemmings.

The single most important thing for investors to understand here is how current market conditions differ from those that existed through the majority of the market advance of recent years. The difference isn’t valuations. On measures that are best correlated with actual subsequent 10-year S&P 500 total returns, the market has advanced from strenuous, to extreme, to obscene overvaluation, largely without consequence. The difference is that investor risk-preferences have shifted from risk-seeking to risk-aversion.

If there is a single lesson to be learned from the period since 2009, it is not a lesson about the irrelevance of valuations, nor about the omnipotence of the Federal Reserve. Rather, it is a lesson about the importance of investor attitudes toward risk, and the effectiveness of measuring those preferences directly through the broad uniformity or divergence of individual stocks, industries, sectors, and security types. In prior market cycles, the emergence of extremely overvalued, overbought, overbullish conditions was typically accompanied or closely followed by deterioration in market internals. In the face of Fed induced yield-seeking speculation, one needed to wait until market internals deteriorated explicitly. When rich valuations are coupled with deterioration in market internals, overvaluation that previously seemed irrelevant has often transformed into sudden and vertical market losses.

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THEY’RE GONNA NEED A BIGGER BALANCE SHEET

Driving home from work on Friday night I found it terribly amusing listening to the “business journalists” on the local news station trying to explain the 531 point plunge in the Dow and the 1,105 point plummet from the Tuesday high. The job of these faux journalist mouthpieces for the status quo is not to report the facts, analyze the true factors underlying the market, or seek the truth. Their job is to calm the masses, keep them sedated, and paint the rosiest picture possible.

The brainless twit who reported the stock market bloodbath immediately went into the mode of counteracting the impact of what was happening. She said the market is overreacting, as the country has strong job growth, low inflation, a strongly recovering housing market, and an improving economy. The fact that everything she said was a complete and utter falsehood was exacerbated by her willful ignorance of the Fed created bubble leading to the most overvalued stock market in history. How can these people pretend to be business journalists when they haven’t got a clue about stock market valuations and just say what they are told to say?

Anyone who listens to a mainstream media pundit, talking head, or spokes bimbo deserves the reaming they are going to receive. They are paid to lie, obfuscate, spin, and propagandize on behalf of their corporate media executives, who are beholden to Wall Street bankers, mega-corporations, and the government for their advertising dollars. The mainstream media is nothing but entertainment for the masses, part of the bread and circuses designed to distract the dumbed down, iGadget addicted, ignorant masses.

The entire stock market bubble has been created and sustained by the Federal Reserve and their QE and ZIRP schemes to prop up insolvent Wall Street banks, enrich corporate executives, and produce the appearance of a recovering economy. The wealth was supposed to trickle down to the masses, but the trickle has been yellow in appearance and substance. The average American is far worse off today than they were in 2007, with the Greater Depression Part 2 underway.

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